As I am planning my escape from my day job, I am working hard to build up passive income streams. Two of my planned income streams will be money from blogging and dividend investments. Money Reasons often covers the idea of using dividends to pay for everyday expenses, so I couldn’t think of a better topic than to examine whether it would be better for someone to invest in creating blogs than to invest in a high paying dividend stock. Overall, I like his idea of using dividends to pay for certain things in life, but I thought I would give it a closer look to see how it compares to blogging.
What kind of return can you expect with a blog?
In order to compare the two investments of managing a blog and dividend investments, we first have to level the playing field. Blogging, as anyone who has done it knows, takes time. Lots of it, in fact. So, in order to make it comparable, we are going to assume that I am creating a personal finance blog and hiring out all the services it takes to effectively run that blog. I will allow 2 hours a week to manage it because I would assume that someone spends that much time looking at or researching dividend investments. That may be a high estimation, but I don’t think it’s that much of a stretch. Estimating the costs this way will help me compare the two investments.
In order to make a blog financially successful, most people say that it takes 6 to 12 months to build up a blog to where it is earning a decent income. For the sake of being conservative in my figure, I will go along with the idea that a blog needs to be in existence for 12 months before it is making a decent profit. Considering that my latest passive income report shows that I am already making $700 each month (primarily from one blog) after 3 months, I don’t think it is out of the question to assume that one could make $1,000 each month from a blog that has been around for 1 year. Before we calculate the return, we first need to figure out our total financial investment to build it up to that $1,000 mark.
Here’s a look at what the expenses might look to build up a blog that would be earning $1,000 each month:
Start up Costs:
Domain Registration and Privacy: $20
Web Hosting: $80
Total Start-Up Costs: $175
$20 per article
x 156 articles for the year (posting 5 articles on the site every two weeks with an additional guest post elsewhere every other week)
Total Content/Writing Costs: $3120
Carnival Submissions – $20 per month ($240 total)
Commenting – $20 per month ($240) [this is just an estimate]
Social Networking (facebook/twitter/fwisp/etc.) – $20 per month ($240) [this is just an estimate]
Total Networking Costs: $720
Total 1 Year Costs: $4015
While some of these figures are estimates, I believe I could build up a reputable site without investing too much time for $4015. Again, while I try to avoid paying any costs to hire anyone to do these things, I had to put it on an equal playing field. So, what does all of this mean?
If we were looking at a two-year window and assuming that at months 12-24, the site made $1000 on average each month, what kind of return would we be looking at? Well, with two years of maintaining the site, the total expenses would be at around $8,000. Yet, your total income would be $12,000 (and that’s not even counting the few months in the 6-12 month period that would be in the hundreds). If you were to invest this all upfront, you would be looking at an estimated return rate of 50% over the two years, or an estimated annual return rate of approximately 22%.
To make a long argument short, if you can find a dividend stock beats a 22% annual return, sign me up. I will admit that I am new to investing in dividend stocks, but it doesn’t take a genius to see that you won’t make that kind of return in any traditional dividend-paying investment. The only down side is that I am not sure how long making money online will last. I suspect it will last another 5-10 years, but who can say that it will last 20 or 30? It may be a short-term investment, but it seems like a darn good one, if you ask me.
What do you think? Would you rather manage a blog or purchase dividend stocks?
This was a guest post from Corey at Passive Income to Retire, where he is tracking his progress to retire by the age of 27.
MR here, I like this comparison, but I really view each form of income generation as part of the same team. Dividends from Stocks, being the more purer form of passive income. Blogging for me takes a lot of time and energy, so I don’t really believe it’s passive income for me, at least not yet. Dividends on the other hand are a buy it once, check it quarterly and that’s it… kind of passive income stream.
Thanks Corey for the interesting angle on passive income.